Just had our inspection for a small lakeside cottage ($117k accepted offer). There were lots of rotten floors (had been hidden under furniture and rugs for staging, ugh) and there was also a broken piping that happened since we made the offer. Waiting on the full inspectors report but obviously we'll be coming back with a much lower offer if we move forward at all.
This is my first deal and I was not looking for a major rehab project. I had hoped to start renting (as an STR) this summer, but that's not in the cards given the extent of renovations needed.
I guess I'm looking for a pep talk! I know that there is a sales price that would make this deal worth it. I would be hiring a contractor to do all of the renovations. And I guess this would be a BRRR opportunity.
What would you do? Help!
It was a good deal that would have had solid cash flow at the price that was accepted. If I move forward I'll take the cost of rehab out of the offer (plus some additional amount for lost revenue during renovations). I won't do it if it doesn't make financial sense. I posted in this forum because I've never done a rehab and I want to hear from seasoned professionals.
Are you getting the property at a discount or is that the market price. I am assuming these are hardwood floors. Provided the floor joists aren’t damaged, this is not a major rehab. In many cases you replace the bad boards and have the floor refinished and it will look brand new. The frozen pipe occurred so the seller will need to repair it. Make sure you have the repair inspected.
If your buying at market price, get some quotes on the floor repair. It might only be a couple thousand dollars. Not a deal killer in my mind.
As an STR, a couple thousand can be made up quick.
As part of your due diligence contact some flooring contractors to get some prices. Your home inspector should be able to help.
My 2 cents - Similar situation last year ..purchased a house with flooring & plumbing issues. Most of the items were taken care off in 4-5 days. It is extremely easy for a skilled contractor to install flooring & also for a good plumbing company to fix the pipes.. yes it does involve additional costs however I think you should try and leverage some $ to be negotiated with the sellers... Lakefront properties in general have a great appeal in the STR world..with the right touch and whistles..it can turn out to be a better deal in the long run.. I know it is a disappointment to find issues int he last minute however the fixes needed which you mentioned if they aren't super major ( radon remediation , lead in pipes , damaged roof etc ) then you should renovate and deploy .. Still time for summer :) .. a gazillion folks book last minute so do not be too worried about losing bookings ... I would however do a thorough check on the location and rental numbers /projections
@Julia Maddox , I will echo the others. If some plumbing and flooring is "major rehabs" then I would not buy the house. Not for financial reasons, but those are relatively cosmetic, and will come up from time to time during your ownership.
Now, if the floors are rotted through to the floor joists, which then extends to more structural issues, now you are likely talking more major rehabs.
I am not a fan of having sellers fix anything. Get a credit at close and hire someone you trust. From a business perspective, you will want cost of repairs, plus lost time plus your work. But if you can just get the costs covered, you are doing well in my experience.
On the properties I purchase, I often use the inspection to negotiate a lower price. I do not ask for a reduction for the issues I knew about, but if things come up that I could not have known, I ask for reductions based on this. Things like flooring that was intentionally hidden, get a reduction, but siding you knew would need replaced, no deduction. If they are unwilling, be prepared to walk away.